Review of Recent activities in the Biotechnology Industry Sector : Focusing on Pharmaceuticals and the Company GlaxoSmithKline
Biotechnology can be defined as the industrial application of living organisms or biological techniques developed through basic research . One type of product derived from these techniques is pharmaceuticals. Many pharmaceutical companies exist globally and produce mainly human health related products such as medicines, vaccinations and dental care products.
Due to the nature of the products being produced in the market, the speed at which new technological breakthroughs affect new products and the high levels of competition within the market, the biotechnological pharmaceutical sector is an extremely difficult industry to exist in. The vast sums of investment required in research of new products and the low percentage success rate of these products has lead to the market being dominated by a few key companies. When referring to the pharmaceuticals market the big players are AstraZeneca, GlaxoSmithKline, Pfizer and Novartis. Recent changes to codes of practice and price legislation, could however affect the performance of some of these market leaders.
The body which governs the pharmaceuticals market, ABPI (Association of the British Pharmaceutical Industry) is introducing a new code of practice as of 1st January 2006. One of the key changes is a requirement for all promotional material to prominently include information on the possible adverse reaction of the drug. To include this information on the advertising for medicinal products could harm sales of all of the companies. These side effects could be extremely unlikely to happen; however having negative effects could scare potential customers from using the drug.
The new code is also reducing the number of pages permitted to advertise and promote medicines. Although initially this would save companies money through reduced advertising costs it could hinder them in the long run. By being unable to promote new products as much as they wish to firms may see that sales figures are not reaching their highest. Not being able to earn enough money to cover research and development costs could mean in the future pharmaceutical companies will not be able to develop drugs for new illnesses which would negatively affect the consumer.
More new legislation which could alter the performance of this sector is the current review by the Office of Fair Trading of the PPRS (Pharmaceutical Price Regulation Scheme) . This scheme has been in place for nearly 50 years and aims to; produce safe, effective medicine, promote a profitable research lead industry, and encourage efficient and competitive development. It aims to achieve these goals by placing a cap on the profits earned from selling branded and prescription medicines to the NHS. This new study could be seen as a cause for concern for the market. If it is determined that the cap should be lowered it would mean a substantial decrease in the profits within the industry. However it could be viewed as great benefit as it encourages more money to be invested back in the business research and development of new products. A clear example of this can be seen at GlaxoSmithKline who as of February 2005 had 140 new products in clinical development .
A recent bankruptcy of a promising drugs developing company, Nobex Corp. has caused a lot of interest in the pharmaceutical sector. Nobex were working towards developing an insulin pill which would revolutionise the way diabetes is treated. However since GlaxoSmithKline pulled out of a deal for scientists from both companies to work together on the project, they have struggled. This case is particularly relevant to the market due to the intellectual property which is now available for other companies to purchase. Nobex have technology to turn injectable drugs into pills without changing the drugs effectiveness . This technology is likely to tempt larger...
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